Caramel Crisp LLC, the owner of Garrett Popcorn Shops (“Garrett”), the renowned Chicago-based purveyor of deliciously flavored popcorn, recently filed suit in federal court in Chicago against its former director of research and development, Aisha Putnam, alleging that she misappropriated the company’s trade secrets, including its recipes for Garret’s famous popcorn, after she was fired. Putnam was hired in 2014 and was eventually promoted to the role of Director of Research and Development, where she had access to some of Garrett’s most confidential information and trade secrets. In that role, she was required to sign a confidentiality and non-compete agreement, which, among other things, required her to return all of Garrett’s confidential information upon the termination of her employment.
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As noted in our February 20th blog post, Robert O’Rourke, a 30 year salesman for cast iron products manufacturer Dura Bar, went on trial in Chicago (Northern District of Illinois) for allegedly stealing Dura trade secrets before leaving to work for a Chinese competitor.  According to the government, O’Rourke downloaded 1,900 files (in 20

A small, Chicago-based magnetic picture frame developer’s claims for trade secret misappropriation against a photo album manufacturer will be headed to trial after an Illinois federal district court largely denied the parties’ cross-motions for summary judgment. Puroon, Inc.’s (“Puroon”) founder and CEO, Hyunju Song, developed the “Memory Book,” “an all-in-one convertible photo frame, album, and scrapbook” that included magnetic openings and an “interchangeable outside view.” In 2013, Puroon launched a website displaying the Memory Book and Song attended various trade shows where attendees were able to interact with the product. Song also sent samples of the Memory Book to representatives of certain retailers without requiring them to sign a nondisclosure agreement.
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The Attorneys General of ten states are investigating fast food franchisors for their alleged use of “no poach” provisions in their franchise agreements, according to a press release by the New Jersey Attorney General’s Office, and as reported by NPR.  In a July 9, 2018 letter, the Attorneys General for New Jersey, Massachusetts, California, Washington, D.C., Illinois, Maryland, Minnesota, New York, Oregon, Pennsylvania, and Rhode Island requested information from eight fast food companies about their alleged use of such provisions.  The letter states that the Attorneys General “have learned that certain franchise agreements used in our States and the District of Columbia . . . may contain provisions that impact some employees’ ability to obtain higher paying or more attractive positions with a different franchisee.”  In other words, the agreements purportedly prohibit one franchisee of a particular brand from hiring employees of another franchisee of the same brand.  
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Democratic U.S. Senators Elizabeth Warren (D-MA), Chris Murphy (D-Conn.), and Ron Wyden (D-Ore.) introduced legislation on April 26, 2018, entitled the Workforce Mobility Act (“WMA”). Although the text of the WMA is not yet available, according to various press releases, it would prohibit the use of covenants not to compete nationwide. In Senator Warren’s press release announcing her co-sponsorship of the bill, Senator Warren stated that “[t]hese clauses reduce worker bargaining power, stifle competition and innovation, and hurt Americans striving for better opportunities. I’m glad to join Senator Murphy to put an end to these anti-worker, anti-market agreements.” 
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Illinois is one of several jurisdictions that recognizes the authority of courts to blue pencil or judicially modify otherwise unenforceable restrictive covenants to be enforceable. See, e.g. Weitekamp v. Lane, 250 Ill. App. 3d 1017, 1028, 620 N.E.2d 454, 462 (4th Dist. 1993) (affirming judicial modification of 300-mile non-compete to specific county); Arpac Corp. v. Murray, 226 Ill. App. 3d 65, 80, 589 N.E.2d 640, 652 (1st Dist. 1992) (affirming the circuit court’s modification of restrictive covenant when it was modified “only slightly” and holding that the balance of the restrictions were reasonable and necessary to protect Arpac’s legitimate business interests).

Recent reported decisions, however, cast doubt on the availability of judicial modification in all but exceedingly limited circumstances. In the past three years, only a handful of cases even mentioned judicial modification and, of those cases, not one actually modified, or affirmed the modification of, an otherwise unenforceable covenant. See AssuredPartners, Inc. v. Schmitt, 2015 IL App (1st) 141863, ¶ 52 (2015) (refusing to modify restrictive covenants because “deficiencies too great to permit modification”); Bankers Life & Cas. Co. v. Miller, No. 14 CV 3165, 2015 WL 515965, at *3 (N.D. Ill. Feb. 6, 2015) (deciding choice of law, noting that “Illinois courts are circumspect in their modification” and that “Illinois courts look skeptically at modifications, and may modify covenants only after ensuring that fairness is not harmed”); Fleetwood Packaging v. Hein, No. 14 C 9670, 2014 WL 7146439, at *9 n.7 (N.D. Ill. Dec. 15, 2014) (rejecting a proposed modification that would a create a durational limitation where none existed before, noting that “[e]ven when courts have found judicial reformation to be warranted, the challenged restrictive covenants needed only slight modification to become reasonable”). 
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shutterstock_511683898On May 11, 2017, a Northern District of Illinois federal court ruled that a Plaintiff properly alleged misappropriation under both the federal Defend Trade Secrets Act (DTSA) and the Illinois Trade Secrets Act (ITSA) in a case where the employee downloaded files onto a personal thumb drive and then went to a competitor.

Plaintiff  Molon Motor and Coil Corporation (“Molon”) contended that its former Head of Quality Control, Manish Desai, downloaded confidential data onto a portable data drive before leaving Molon for a competitor, Nidec Motor Corporation (“Nidec”). Molon further contended that Desai provided the confidential data to Nidec and Nidec then used (and continues to use) the confidential data to compete with Molon. Nidec filed a Motion to Dismiss Molon’s Complaint against Nidec (Molon did not sue Desai) on the basis that Molon could not state a claim under the DTSA or the ITSA because a) Desai downloaded the trade secrets while still employed by Molon, and b) Molon did not make a plausible allegation that Nidec used the trade secrets.
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shutterstock_192971546Three very recent decisions reflect the irreconcilable division of judicial authority regarding the adequacy of at-will employment as the sole consideration for an otherwise valid non-compete.  Compare (a) Standard Register Co. v. Keala, No. 14-00291 (D. Haw., June 8, 2015) (adequate under Hawaii law) (“majority rule”), with (b) Hunn v. Dan Wilson

shutterstock_186292982In Illinois federal court, a plaintiff alleged aspects of their LinkedIn group were trade secrets misappropriated by the defendant. The defendant moved to dismiss for failure to state a claim. The court denied the motion in part and granted in part, ruling that portions of social media groups may be protectable under the state’s trade